Sealed Air: Option Traders See Additional Upside in Hot Packaging Industry

Sealed Air (SEE) has risen nearly 70% off its February lows, but just yesterday breached the level that it opened the year at, which was a major resistance level on the charts, and it did so on 3.1M shares, nearly 2X the average trading volume. This was followed with a break of the 200 day EMA and a bullish MACD crossover, as SEE looks to have bigger gains ahead. Option traders felt the same, trading 21X the normal call volume today, as more than 3,200 calls traded versus 300 puts. Some shorter term players were buying the May $17.50 calls with shares just above $17, while the majority of the action took place in the October $20 calls, with traders looking for larger upside.

Sealed Air is a packaging and container firm mainly in the food industry, and may have seen much of its rise yesterday on the coat-tails of the great earnings report at Pactiv (PTV). Bullish breakouts and options action has been rampant in the packaging and container sector where recently Crown Castle (CCK), Medwestvaco (MWV), Packaging Corp (PKG), Tupperware (TUP), Owens Illinois (OI), and Grief (GEF) have all had huge gains, also benefitting from the recent buyout of the two Pepsi Bottlers. (Side Note: Bemis (BMS) could be the next packager to watch.) Many of these stocks have risen a lot but are still more than 50% off highs from just 1 year ago and recent earnings results show the group is a safe area to be in during an economic downturn, while also being a beneficiary when the economy begins to come out of a recession as well.

Additional: On 4/17 I had the following story on my site:

MedWestvaco Corp (MWV) broke out of a major bull flag today and option traders were paying attention as multiple lots of May $15 calls were purchased, totaling 2,600 or 40.4X the average call volume with every trade I am seeing either blasting the offer or paying 5 cents from the offer on $0.15 bid-ask spreads, very bullish plays. Implied volatility is near a 1 year high for packager and container company with earnings scheduled for the open on April 29^th. Recent earnings by Crown Castle (CCK) bode well for MWV, and that could be some of the reasoning behind the bullish bets today.

Disclosure: Considering Investment in SEE and MWV

Comments

[Joe Kunkle:]

would also add that a sympathy bet on this would be to go long the paper producers like International Paper (IP), Wassau Paper (WPP), Potlach (PCH), Aracruz (ARA), Votorantim (VCP), Rock Tennessee (RKT), Domtar (UFS), Sonoco (SON), Sappi (SPP), Temple Inland (TIN), and Buckeye (BKI).

Apr 24 12:26 PM